Competitive Advantage of the UK

Foreign Investment is the biggest driving force of International economy. Direct investment by multinationals has increased by 25% according to the United Nations Conference on Trade and Development.

Establishing a factory or business abroad is a huge investment that can't be reversed. These businesses are required to have along term view towards such establishments. Research shows that the availability of skilled labor, cultural amenities, good transportation links and a skilled workforce are all significant factors.

Foreign Investment is important to the UK, and the UK continues to lead Europe in terms of attracting foreign investment. There are many reasons why Multinationals and International businesses prefer the UK as an investment destination.

Openness to Foreign Investment:

The UK doesn't discriminate between foreign individuals and nationals in formation and operation of private companies. US firms establishing foreign subsidiaries in the UK do not have to fulfill special nationality requirements for shareholders or directors except the condition that there should be at least one director of the established firm residing in the UK. The British Government defends the rights of any British registered company in the EU without giving any importance to nationality of ownership. Also, it doesn't discriminate between UK firms or foreign nationality owned firms.

US firms prefer investing in the UK due to factors such as common language, similar business cultures and legal heritage. Japanese firms prefer the UK as an investment destination because it acts as an export platform to export manufacturing goods to other European countries. Long term economic and political stability, regulator stability coupled with relatively low taxation rates and inflation make the UK an attractive destination for foreign investors. The government is committed to economic reform which includes deregulation, privatization and support for healthy competition.

Inward investors are likely to benefit from certain EU and UK regional incentives and grants that are proposed to attract industry to areas where there is high unemployment.

Simple Tax System:

The tax system of the UK is simple. Corporations are taxed 28 percent on profits over 1.5 million GBP while small companies pay tax at a rate of 21 percent on profits up to 300,000 GBP. Small companies are given marginal tax benefits on profits ranging from 300,001-1,500,000 GBP. This tax system also allows tax deductions on expenditures and depreciation of assets used for trade. The assets over which tax deductions are accepted are industrial buildings, machinery, plant equipment and assets used for research and development purposes. Unit trusts and open ended investment companies are required to pay 20 percent tax on profits earned.

Foreign Trade Zones/Free Ports: The freight shipment points and cargo ports at Liverpool, Prestwick, Sheerness, Southampton, and Tilbury are considered as Trade free zones. These trade free zones provide additional advantages to EU companies in comparison to US or non-EU firms.

In the event of the nationalization of any business, the British Government adheres to customary international law by providing adequate, prompt and effective compensation.

With so many business friendly aspects, the UK is surely a place which every investor must look for. All these competitive advantages give the UK the edge and make it a hotspot for investment among all the leading countries in the world.